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Gable Holdings: Up, up and still more up to come!

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I first recommended shares in Gable Holdings (LSE:GAH), a European non-life insurance company underwriting a range of specialist commercial sector policies, in July 2006 when the shares traded at 18.5p. This has been something of a slow burner – the shares having commenced 2012 trading at just above 22p. However, they have moved sharply higher since early summer to currently trade at 31.5p – a near high since my original recommendation. Now sitting on some meaningful gains here, the following takes a renewed look at the investment case.

© Tom Winnifrith

The shares have enjoyed continued momentum since end of September when Gable announced results for the first six months of calendar 2012. These showed an underlying pre-tax profit of £3.70 million on gross written premiums 26.4% higher than in the comparative prior year period, at £15.41 million. This led to a 43.9% increase in earnings per share, to 3.05p. At the period end cash (net) totalled £10.79 million and net tangible assets were £11.65 million.

The period saw growth in written premiums continue across all the company’s product classes in the UK and Europe, with particular growth in its French ‘Property Liability Product’ and its ‘After the Event’ insurance programmes. The company added “growth in the business has continued strongly into the second half of 2012 and looking at both the UK and European markets, the board is confident that Gable has a platform to deliver a very strong year of growth in 2013”.

The company’s strategy is focused on growing in both its existing countries of operation and, via its European-wide licensing, to exploit the “considerable scope” it sees to roll out into new territories – in September it launched its first product into the German market where it has commenced writing a programme of business for its tenant deposit guarantee product. There seem to be no end-market problems here – with the company emphasising in the results statement that it is “particularly encouraged by the buoyant markets in which we operate and the increasingly positive reception that the Gable brand now receives in each market of operation”.

With the shares having closed at 27.375p the day before the recent results announcement, it is no surprise that the announced figures and outlook comments have seen the shares continue to rise. House broker, Panmure Gordon, has adjusted earnings per share of 5.63p pencilled in for 2012, rising to 7.43p in 2013. It also notes a “highly enviable” underwriting track record and given this and the growth being delivered and forecast, an earnings multiple of 5.6, falling to 4.2, looks materially too low. Given the current £35.7 million market capitalisation is also supported by £11.65 million of net tangible assets on the balance sheet, I believe the shares would not be particularly expensive at double current levels and believe there materially more gains to come for shareholders here. Still a buy at up to 37p in my view with a target of 60p.

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Comments

  1. Siraj says:

    I agree its a winner, value growth stock with a good momentum. As a very cautious investor I notice the share price has hit a recent resistance around 45p, do you think that this is just temporary or can it still get to 60p

    EPS normalised TTM, 2012E and 2013E are 4.75p and 5.60p and 8.80p respectively.

    Also a lot of safety in the value with Market Cap as at todays price 48M and yet Enterprise Value 37.3M

    I look forward to more share tips of this calibre!

    I am just concerned that a buy at todays price feels risky (only very short term point of view) I wonder if I could get in a little lower than the 40p mark? however long term over 3 years plus its a good company to invest in, every year they have grown turnover and profits..CAGR is +62% since 2006.

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